At issue are privatizing the state retirement system and using a surplus to boost teachers' pay.

Lobbyists for big investment firms are scurrying around the capital looking for angles to give their clients the edge.

Fights are breaking out. Old friends are now foes.

Welcome to the debate over the privatization of the state's multibillion-dollar retirement system.

The idea is simple enough: Lawmakers want to allow about 600,000 government employees to take money they now pay into the state's retirement system and instead invest it in a tax-deferred retirement fund.

From the private sector's viewpoint, it may be the most lucrative thing lawmakers will do all session. Depending on how many government employees choose the new option, some estimate the investment companies that win the right to offer the 401-K-style plans could make hundreds of millions of dollars in fees.

"That's all this has ever been about -- money, not the employees," said Mark Neimeiser, a lobbyist for a union that represents government employees.

Currently, most government employees pay into the state retirement system. The state invests that money. When employees retire, they receive a guaranteed amount of retirement benefits if they have served long enough to be vested.

The new system would be modeled after the retirement plan the state now offers to certain university employees and community colleges. The state Board of Administration -- comprising the governor, the state treasurer and comptroller -- would choose a company, called the "third party administrator," to manage the system and interact with employees.

The board also would choose a number of private investment companies qualified to offer different portfolio options. Employees who choose to participate in the new system would then select one of the companies and pick an investment package that best suits their needs and willingness to put money at risk.

The way the proposals are taking shape, very few companies could qualify to become the third-party administrator. Merrill Lynch & Co. and Fidelity Investments are two that would be able to run a program of the size Florida lawmakers contemplate.

Those two companies want lawmakers to allow the third-party administrator to be able to compete with other companies that offer employees investment packages.

Ronald Book, a lobbyist for Fidelity, said 23 of the 25 largest private pension funds in the world allow the third-party administrator to also sell their products.

"If it's okay in the private sector, why isn't it okay for government?" he said.

But other investment companies say that would give the third-party administrator an unfair advantage: As administrator, the company would be privy to employee investing patterns and could tailor its own products accordingly.

"It would give them a leg up in selling their product," said Curt Kiser, a lobbyist for VALIC, which wants to compete for state employees' business.

The House agrees -- its bill would ensure that the company that becomes the third-party administrator could not sell its own products.

"The third-party administrator looks at trends, checks to see if employees are making good investment decisions," said Rep. Ken Pruitt, R-Port St. Lucie. "It's a blatant conflict."

So lobbyists turned their attentions to the Senate. Fidelity recently hired Peter Dunbar, a former North Pinellas lawmaker who is friendly with Senate Majority Leader Jack Latvala of Palm Harbor. The issue blew up Thursday during a meeting Latvala called with several lobbyists.

Latvala took over Kiser's Senate seat in 1994, and the two are friends. But Latvala told Kiser that he was "excused" from the meeting after Kiser refused to budge from his position.

"He was being obstinate -- I succeeded Curt, and Curt still thinks he needs to tell me what to do," Latvala said.

On Friday, the Senate -- led by Latvala -- agreed to allow the third-party administrator to sell its products on a limited basis.

All of the maneuvering may be for nothing. The Senate on Friday tied the changes in employee benefits to Senate President Toni Jennings' top priority: using about $3-billion of the surplus in the state retirement fund to increase benefits and raise teacher salaries by up to 8 percent.

But House leaders are adamantly opposed and say the Senate plan is too risky.